According to a recent report on anti-money laundering published by the US State Department, the northern part of Cyprus held by Turkey and administered by Turkish Cypriots has been accused of not having the right legal and institutional framework to fight money laundering. Although the authorities have made efforts to address some deficiencies in the law against money laundering however, the casino sector and offshore banking sector still pose a significant threat. Due to numerous sanctions and lack of recognition of the “TRNC”, the banking sector is completely removed from international financial institutions as they do not have access to SWIFT system and also, no corresponding banking relationships with financial institutions outside Turkey. This isolation from International institutions has helped to the risk of money laundering as it has become difficult to transfer illegal funds outside the jurisdiction of Turkish Cypriots.
In November 2019, there were 34 casinos in this breakaway area and poor or inadequate law enforcement resources and professionals have left the sector susceptible to money laundering. There were also 7 offshore banks and 475 international financial services company that are exposed to high money risk due to the poor regulatory framework of the area. The report also has it that smuggling of illegal drugs, tobacco, alcohol, and foodstuffs across the UN buffer zone as well as the violations of intellectual property rights have become common activities in the areas and significant effort is required to better regulate the offshore and onshore banking sectors and casinos.
